A payday loan is a short-term loan, usually for a relatively small amount, that a consumer will take out in order to cover immediate or emergency expenses. Traditionally, payday loans have been provided by brick and mortar companies. Today, however, there are more and more Internet-based payday loan providers than ever before.
These loans are often used by people of low to moderate income as a way to pay for an expense prior to their next paycheck. An Internet payday loan is basically the same type transaction that follows the same basic principles, the only difference being that it becomes a service integrated into the internet.
As more and more service and shopping businesses have moved online, the payday loan industry has followed suit. In fact, many financial transactions have moved online as well. Whether it’s banking or managing a retirement account, you can do pretty much anything online you could do in person.
Internet-based payday loans, like other businesses based on the Internet, provide some specific benefits to their users. First, the service is more accessible. Location is no longer a problem, as the customer can get the payday loan right from their home. It’s also easier for the lender, as there are fewer expenses involved in running the Internet service than there are in maintaining a brick and mortar store.
The Internet also gives lenders access to finding more clients via their online presence. They can utilize promotional methods that are often more readily available and less expensive than traditional advertising.
When you get an Internet payday loan, the application is processed electronically. In some cases, the borrower may be required to fax in paperwork such as a proof of income, but this isn’t always the case. Internet payday loans are also easier to track, and can save all sorts of time both for the person applying for the loan and for the loan company.
There are some people that advise against Internet payday loans. Like other online transactions, there are risks involved. You need to be certain of who you’re dealing with before you actually apply for an Internet payday loan because you don’t want to become vulnerable to abuse or identity theft.…
Increasingly, there are more and more institutions cropping up who are willing to make payday loans to low income Americans with poor or no credit scores. Many of these institutions are traditional banks, however, and not payday lenders, thanks to a program sponsored by the FDIC.
There are a large number of people in the low-income ranges that may be able to benefit from smaller dollar loans. Traditionally, these folks have turned to payday lenders. Payday lenders meet a very specific need. However, they have their critics as some people claim payday loans are predatory or unreasonable.
Today, there are 31 commercial institutions in 26 states that are participating in the new FDIC program. This program offers small dollar loans of less than $2,500 for a short term. While some of these banks have been offering these kinds of loans for some time, many of them are new and have started offering the loans as a part of the response to the FDIC program.
The goal of the FDIC program is to assist between 80 and 100 million Americans avoid either payday loans or overdraft protection programs with high fees. The program will be completed this year, and the FDIC will be releasing a report with its results in February of 2020.
The small-dollar borrower can be an attractive new customer base for the banks. These are designed to be an alternative to the high rates that consumers pay with other options. Consumers can then use these small dollar loans to help build their credit scores.
The average term for these loans is around nine months. The interest rate is usually between 14 percent and 18 percent APR. This is significantly lower than the alternatives of overdraft protection or of payday loans.
With overdraft protection in a bank account, consumers will overdraw their account and be charged a fee of $35 or more for the overdraft, no matter how much the draw is. This amounts to around $35 billion each year in the banking industry. Most of those fees come from account holders with low income, who intentionally overdraw their account as a sort of short term loan to cover their living expenses. Overdraft is something of a line of credit for some people.
Whether these kinds of FDIC loans will overtake the popularity and convenience of payday loans, of course, remains to be seen.…